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Sorry for the lack of updates today folks. I was lucky enough to be invited to the Beverly Hills and Greater Los Angeles Association of Realtors meeting to hear Brad Inman and Dustin Luther talk about blogging in real estate. I highly recommend that if you are the industry you try to hear either of them speak - you’ll learn a lot about where we are headed in terms of marketing to customers.
Anyway, I digress. Thank you to EVERYONE that emailed me to let me know that news that Bank of America is exiting wholesale lending at the end of the year. They will accept loans from brokers until 11/25 which must close by 12/31. From the web site (here’s a link to the PDF of the announcement):
Important Announcement
Today Bank of America announced that it will exit the wholesale mortgage business in order to devote increased energy to its expanding retail channels.
We will be fulfilling all of our contractual obligations to you and your customers. The termination of your Wholesale Broker Agreement will be effective November 25, 2007. All loan files must be locked and delivered by that date. During this transition period, please be assured that our sales and fulfillment teams will continue to provide you with the exceptional level of service you’ve come to expect. If you have any questions during this time, please contact your account executive.
We thank you for your business and wish you continued success.
Well, I am not happy to say that I pointed to Bank of America as one of the banks who would force brokers out of the equation in my “Dead Man Walking” post. They clearly outlined to their investors their desire to focus on retail originations instead of the broker channel.
Finally, Bank of America made clear on page 66 of their 94 page Q2 2007 Investor Factbook that the “Key Business Strategy” for their First Mortgage products is retail. (PDF)
“Bank of America is focused on increasing the volume of mortgages in direct-to-consumer channels, including Banking Center and Retail Sales channels.”
It can’t be any clearer than that.
But let me toss this theory out there for you. Countrywide reports tomorrow, the results are terrible. The stock tanks to under $10 a share and Bank of America buys out Countrywide for a bargain (far less than the $18/share convertible $2 billion loan given to Countrywide earlier). Bank of America leverages Countrywide’s wholesale to sell Bank of America products.
What do you think?
It sounds like a reasonable assumption. Though I think BofA is in no big hurry to close the transaction. I’m sure that their investment in CFC puts them in 1st position for an outright buy. Let Angelo and company become the poster children for everything that’s wrong in the mtg. industry. After a few months of pain for CFC, and the stock price hits the low single digits, then they’ll take over. They’ll be the white knight coming to the rescue of all those poor CFC souls into brand new BofA products, for a hefty fee of course. Think of all those OA’s that CFC has on the books that they can refi, for a hefty fee of course, over the next 4-5 years.
PS Do you true believers still think the industry needs brokers? 5.75 months and you’re toast.
I have worked on both sides retail (CFC for 2 years) and wholesale. As a finance major first, then a loan officer, I know products in retail are limited even with todays credit crisis. The main reason I left retail was the referral base I was starting to build within the industry. Right now I have a $2,250,000 refinance that none of the major banks can touch but other wholesale outlets can. The scary thing about retail was the lack of experience even after training.
I cannot speak for B of A but at CFC other loan officers and the branch manager would wait for me to come in and ask complex mortgage questions that only a license loan officer or broker could answer. This was scary because our particular sales force was about 40 loan officers and only 5 were license by the state. Of those five we all got a workout daily explaining and answering mortgage questions daily.
I say this only because CFC hired me mainly for my computer skills first because of the new mortgage operating system they launch about 4 years ago. I am a computer geek.
Although wholesale channels will be limited, retail will always have its limitations and wholesale will fill that void due to unlimited options. Whether its retail or wholesale the real truth becomes the pricing model, products availabiliy, and reasonable guidelines that make sense to investors short or long term. Just look at all the write-offs lenders posted this past week and ask yourself who was the winners or losers.
NO offense Eyes, but chances are on that refi there is a good reason WHY you have to go through the channels you are to possibly get the refi done..lets see if it actually happens and I am sure that the cost to your client is beyond significant… basically in the end it will the hard money lenders(legal loansharks) that will become, for the limited amount of brokers left, the channel for $$
Also, unlike before when there was “limited” talent out there to hire(simply because more money could be made in your own business)..with all the layoffs there is plenty to go around…the banks know that and are taking advantage of the ability to hire seasoned professionals to get the ball rolling in retail…
Ann,
No hard money for this client. Loan is approved pending appraisal. Ann, I use to be the main person at CW when it came to structuring big jumbo loans. In the past CW or WAMU would of been all over this refinance. Keep in mind my clients are mainly “A” paper borrowers. Thank goodness I didn’t feed into the subprime business like so many other loan officers and AE’s! Last, the refinance client has a 5 year fixed hybrid arm and the rate is 6.875% @ 0 points paying a YSP of .750! Retail can’t touch the rate or loan size.
Ann, I use my retail model to sale loans in wholesale to potential and return clients.
Ann, everyone I know in retail is scared to death about their company. They all complain about their pricing and lack of product.
I have the ability to price loans that my retail friends cant understand. I can price a loan at 50bps. I also still have a lot of the product that they saw disappear months ago.
Whats the overhead in your office for originations? Look around and consider what everything you see cost? Is it more than your wholesale competitors are spending right now on their operations? Who do you think has the ability to slim down faster and more cost effectively? Being able to turn on a dime is naturally a benefit for the brokers.
Regarding BOA being out of Wholesale. I have never ever been able to close a loan with them because they never really tried hard to succeed in wholesale. They never were able to out price, out service or even come up with competitive products. Their exit will not be missed by anyone except their employees.
B of A has always played it conservative in the Wholesale Mortgage Division. 2004 to 2007 when all of the competition was was packing there pipeline’s with Option-arm paper, B of A wholesale sat on the sidelines. On a cost per loan basis the Wholesale division operated at a lower cost than any other channel in the Mortgage Division (Retail most costly) Wholesale’s Operation’s went regional in 2004 with the closure of it’s highest producing Operations in Pleasant Hill. By contrast, Countrywide has been expanding there Wholesale branch presence. In any bank merger, divisional overlap in the first is to be addressed. Is there a fit?
- B of A has huge local retail branch presence (Countrywide has little to none)
- Countrywide is the Mortgage Banker with a huge presence in third party mortgage origination (B of A will soon have none)
- B of A captures much of their customer through Mortgage Servicing & cross-selling